Even as construction activity slows nationwide, the cost of building out office space in the U.S. continues to climb, up about 5% year-over-year, according to Cushman & Wakefield. The increases, driven by persistent labor shortages, rising material prices and ongoing tariffs, are pushing office fit-out costs to new highs from New York to San Francisco.
The pain is most acute in the Northeast, where pricing has surged 7%, while the Midwest saw the mildest change at just over 2%. The Tri-State region—New York, New Jersey and Connecticut—posted the steepest average costs at $193 per square foot. San Francisco tops the national list at $228 per square foot, followed closely by San Jose at $224 and Seattle at $223. Other high-cost markets include New York City ($221), Boston ($213), lower Connecticut ($201), Los Angeles ($198), Portland ($188), San Diego ($178) and Chicago ($175).
Although 2025 construction costs remained below the 10-year average, growth exceeded the three-year trend, largely due to the imbalance between high demand and limited skilled labor. Wage growth and expensive materials have created persistent upward pressure on pricing, even as office development itself remains muted.
The U.S. construction cost index, as measured by McGraw-Hill, shows the steepest year-over-year rise in skilled labor, up 5.7%. Building costs followed at 4.2%, with common labor up 4% and overall construction costs increasing 3.5%. Meanwhile, the prices of key materials such as copper, cement, steel and lumber continue to shape project budgets. Using 1982 as a base of 100, copper has soared to about 750, cement to 450, steel pipe and tube to 350 and lumber to 250.
On a year-over-year basis, copper jumped roughly 10%, steel and concrete rose about 5%, while lumber was flat. Over the past three years, copper climbed by around 30%, concrete by 25%, lumber dropped by 9% and steel fell by 20%.
Cushman & Wakefield attributes copper's rapid rise to "electrification demands, including electric vehicles, data centers, and power grid upgrades." Concrete's increase stems from "cost-push pressures from 2022 and 2023, when sharp increases in fuel and electricity costs raised the industry's cost base."
Although U.S. construction employment grew only a modest 0.3% year-over-year, wages have climbed more rapidly over the last few years, rising 5% to 8% annually. That sustained pattern compounds costs, creating a self-reinforcing cycle of higher labor and fit-out pricing. At a 5% rate, the report notes, fit-out costs would double in roughly 14 years using the rule of 72.
About one-third of respondents expressed at least some concern that changes in U.S. immigration policy could affect their labor force, a factor that could further tighten the construction labor market if restrictions intensify.
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